Private Real Estate Funds
Real Estate Funds are another method by which investors may pool their money to acquire real estate assets. These funds generally raise smaller amounts of money than a REIT (usually up to $25 million) and will typically acquire fewer properties than a REIT. They may also look to achieve more growth opportunity and as a result may be considered a more risky investment.
Most Real Estate Funds are considered exempt offerings under Rule 506 of Regulation D. This regulation exempts the offering from registration with the SEC and requires that investors meet certain income or net worth limits. Investors must be “accredited,” which means they must have a net worth over $1 million, excluding equity in their primary residence, OR have individual annual income of $200,000 or more ($300,000 if filing jointly) in each of the two most recent years and a reasonable expectation of the same level in the current year. Different requirements apply for businesses, trusts or other entities.
Real Estate Funds will typically outline their acquisition, management and liquidation strategies in the Private Placement Memorandum (PPM). This document is intended to help investors better understand the objectives and risks associated with the investment. Investors should understand the risks associated with each investment prior to making an investment in a Real Estate Fund. These risks include, but are not limited to lack of liquidity, fees, ceasing of cash flow, market risk and the loss of principal. Representatives of Global Wealth Partners, Inc. can help potential investors understand these offerings and the benefits and risks associated with each particular investment.
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